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Guru Age Versus Performance?

| | Posted in: Investing Expertise

A reader asked: “Is there a correlation between guru success and age. I ask this because: (1) Nassim Taleb talks about the success of younger traders (prior to blowing up at some point); and, (2) pessimism increases with age, or so it seems, and older traders are therefore likely to miss uptrends.”

There is some research relevant to your question based on mutual/hedge fund and fund manager data. See:

“What It Takes to Drive the Big (Hedge Fund) Rigs” …smart young (hedge fund) drivers wanted.

“Success Factors for Mutual Funds Worldwide” …mutual fund investors venturing into the international arena may want to apply these findings to screen funds according to size, age, fees, management and country.

“A Fresh Hedge Fund Horse Every Couple of Years?” …investors may want to get a fresh hedge fund horse every two or three years.

“The Outperformance of (Truly) New Hedge Funds” …hedge funds that are truly new offer investors notable average outperformance for the first couple of years. However, funds that back fill prior performance data when they first start reporting appear to have already “used up” their startup alpha.

“Outperformance of Distinctive Hedge Fund Strategies?” …hedge fund investors are probably better off with maverick funds, perhaps new ones every couple of years, than with those cut from the herd.

The evidence supports your hypothesis more than it conflicts. The age of funds versus the age of fund managers may be a confounding factor.

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